May 2, 2008

 

US hog slaughter in May and June to continue 10 percent on-year increase
 

 

US hog slaughters in May and June are expected to track about 10 percent above a year ago, extending the double-digit average increase in pork supplies seen in the first four months.

 

As supplies have been running consistently large since the beginning of the fourth quarter, there is little reason to believe a sudden downturn anytime soon, analysts said.

 

Some said the biggest year-on-year increases in weekly and monthly slaughter totals for 2008 may have already been set.

 

Preliminary data show April weekly slaughters averaged nearly 14 percent above a year ago, compared with an average increase of 10.8 percent in the first quarter.

 

Prices have been declining at the consumer levels due to the very large supplies. In February and March, pork packers were forced to sell at very low prices to keep the product moving. On April 1, the pork carcass cutout value hit a 51-month low, but prices have rebounded sharply since then. With seasonally smaller hog supplies expected into the summer months, fewer bargains may be found in the stores.

 

Don Roose, analyst with US Commodities Inc. in West Des Moines, Iowa, predicts that hog slaughter rates in May-June could be similar to those in March and April. Liquidation of breeding animals may add some to the slaughter supplies, as could imports of sows from Canada.

 

Higher feed costs have caused producers to bring average hog weights down, which indicate slaughter-ready supplies are more current. This might result in fewer hogs being available to packers in May and possibly June, analysts said.

 

The average weight for barrows and gilts in Iowa/southern Minnesota last week was reported at 264.6 pounds, down 1.0 pound from the previous week and 2.9 pounds below a year ago.

 

Bob Brown, private analyst in Edmond, Okla., said last week's live-weight average according to the USDA's prior-day slaughtered report was down 1.4 pounds from a year ago and the lowest for that week since 2004.

 

Ron Plain, agricultural economist at the University of Missouri said April hog slaughter was inflated by producers pulling ahead on marketings. They were responding to the high feed costs and trying to reduce losses, he said. Hogs near marketing weight can gain about 2 pounds per day, so the 2.9 pound decline in Iowa/southern Minn. for last week from a year ago suggests that producers have pulled ahead on marketings by about 1 1/2 days.

 

On a national basis, USDA shows the live weight about even with a year ago, which indicates that producers in other areas such as North Carolina have not reduced marketing weights as much. Plain said most of the hogs in North Carolina are produced by operations that are part of vertically integrated Smithfield Foods (SFD). The company may want to keep the carcass weights up to maintain efficiency in processing the animals whereas in Iowa/southern Minn., many of the hogs come from independently-owned operations that tend to respond more to feed costs.

 

Despite huge hog supplies, cash hog prices have risen sharply in recent weeks, said Chris Hurt, agricultural economist at Purdue University.

 

The USDA showed western corn belt prices at US$49.72 per hundredweight in the third week of March, but they rebounded to hit US$73.34 earlier this week.

 

"The much larger than normal seasonal increase is not likely explained by supplies," Hurt said. "Demand seems to be the more likely reason."

 

He said weakness in the economy and the pressure being put on family budgets may have forced consumers to look for a cheaper alternative, shifting from beef to pork.

 

In March, retail beef was US$4.205 per pound compared to pork at US$2.833 per pound.

 

Strong export sales also may have been a factor, Roose added.